RESTRUCTURING INITIATIVES

Additional Restructuring Charges 2015

As a result of the current economic environment, including the impact of foreign currency movements and inflation on our expenses, and in an effort to continue to improve our cost structure, we identified certain actions that we believe will reduce ongoing costs. To date, these actions have primarily consisted of global headcount reductions.

As a result of these restructuring actions, we have recorded total costs to implement these restructuring initiatives of $32.2 before taxes, during the first half of 2015 in selling, general and administrative expenses, in the Consolidated Statements of Income. There are no material remaining costs for restructuring actions approved-to-date. In connection with these restructuring actions, we expect to realize annualized savings of approximately $35 to $40 before taxes. We began to realize savings in the second quarter of 2015 and expect to achieve the annualized savings beginning in the third quarter of 2015. The annualized savings represent the net reduction of expenses that will no longer be incurred by Avon.

The costs to implement of $3.7 and $32.2 recorded during the three and six months ended June 30, 2015, respectively, consisted of the following:


•	charges of $.2 and $26.8, respectively, for employee-related costs due to severance benefits; and


•	implementation costs of $3.5 and $5.4, respectively, primarily for professional service fees associated with Corporate and Asia Pacific.

The majority of cash payments, if applicable, associated with these charges are expected to be made during 2015.

The liability balance, which primarily consists of employee-related costs, for these various restructuring initiatives as of June 30, 2015 is as follows:



	Total
2015 charges	$	27.4
Adjustments	(.6		)
Cash payments	(12.2		)
Foreign exchange	(.1		)
Balance at June 30, 2015	$	14.5

The charges approved to date under these various restructuring initiatives by reportable business segment were as follows:



	Latin America			Europe, Middle East & Africa		North America		Asia Pacific			Corporate		Total
First Quarter 2015	$	3.3		$	5.3	$	1.6	$	7.0		$	9.4	$	26.6
Second Quarter 2015	(.2		)	—		.5		(.3		)	.2		.2
Charges incurred to date	$	3.1		$	5.3	$	2.1	$	6.7		$	9.6	$	26.8

$400M Cost Savings Initiative

In 2012, we announced a cost savings initiative (the "$400M Cost Savings Initiative") in an effort to stabilize the business and return Avon to sustainable growth, which was expected to be achieved through restructuring actions as well as other cost-savings strategies that will not result in restructuring charges. The $400M Cost Savings Initiative was designed to reduce our operating expenses as a percentage of total revenue to help us achieve a targeted low double-digit operating margin. The restructuring actions under the $400M Cost Savings Initiative primarily consist of global headcount reductions and related actions, as well as the closure of certain smaller, under-performing markets, including South Korea, Vietnam, Republic of Ireland, Bolivia and France. Other costs to implement these restructuring initiatives consist primarily of professional service fees and accelerated depreciation, and also include professional service fees associated with our North America business. A portion of the professional service fees associated with the North America business are contingent upon the achievement of operating profit targets. These fees were recognized over the period that the services were provided and are based upon our estimate of the total amount expected to be paid, which may change based on actual results.

As a result of the restructuring actions associated with the $400M Cost Savings Initiative, we have recorded total costs to implement these restructuring initiatives of $242.9 before taxes, of which $12.5 before taxes was recorded in the first half of 2015. For these restructuring actions, we expect our total costs to implement restructuring to be approximately $250 before taxes. The additional charges not yet incurred associated with the restructuring actions approved to-date of approximately $5 to $10 before taxes are expected to be recorded primarily in 2015. In connection with the restructuring actions associated with the $400M Cost Savings Initiative, we expect to realize annualized savings of approximately $275 to $285 before taxes. Substantially all of these annualized savings are expected to be achieved in 2015. For market closures, the annualized savings represent the foregone selling, general and administrative expenses as a result of no longer operating in the respective markets. For actions that did not result in the closure of a market, the annualized savings represent the net reduction of expenses that will no longer be incurred by Avon. The annualized savings do not incorporate the impact of the decline in revenue associated with these actions (including market closures), which is not expected to be material.

Restructuring Charges – Three and Six Months Ended June 30, 2015

During the three and six months ended June 30, 2015, we recorded costs to implement of $7.7 and $12.5, respectively, related to the $400M Cost Savings Initiative in selling, general and administrative expenses, in the Consolidated Statements of Income. The costs consisted of the following:


•	implementation costs of $1.7 and $4.2, respectively, primarily related to professional service fees associated with our North America business;


•	benefit of $.6 and charge of $.4, respectively, for employee related costs due to severance benefits;


•	accelerated depreciation of $1.6 and $2.3, respectively, associated with the closure and rationalization of certain facilities; and


•	contract termination and other net charge of $5.0 and $5.6, respectively, primarily related to the costs associated with the closure of a North America distribution center.

The majority of cash payments, if applicable, associated with these charges are expected to be made during 2015.

Restructuring Charges – Three Months and Six Months Ended June 30, 2014

During the three and six months ended June 30, 2014, we recorded costs to implement of $51.0 and $73.1, respectively, related to the $400M Cost Savings Initiative in selling, general and administrative expenses, in the Consolidated Statements of Income. The costs consisted of the following:


•	charges of $34.6 and $49.5, respectively, primarily for employee-related costs, primarily severance benefits;


•	contract termination and other charges of $6.2 and $7.5, respectively, primarily related to costs associated with the closure of the France market and the exit of the Service Model Transformation ("SMT") facility;


•	accelerated depreciation of $6.1 and $7.5, respectively, associated with the closure and rationalization of certain facilities and other assets;


•	charges of $3.7 and $3.7, respectively, primarily related to the accumulated foreign currency translation adjustments associated with the closure of the France market; and


•	implementation costs of $.4 during the three months ended June 30, 2014, primarily associated with the closure of the France market, and $4.9 during the six months ended June 30, 2014, primarily related to professional service fees associated with our North America business.

The liability balance for the $400M Cost Savings Initiative as of June 30, 2015 is as follows:



	Employee- Related Costs			Contract Terminations/Other			Total
Balance at December 31, 2014	$	50.1		$	.5		$	50.6
2015 charges	2.8			5.6			8.4
Adjustments	(2.4		)	—			(2.4		)
Cash payments	(24.6		)	(5.8		)	(30.4		)
Foreign exchange	(1.1		)	—			(1.1		)
Balance at June 30, 2015	$	24.8		$	.3		$	25.1

The following table presents the restructuring charges incurred to-date, net of adjustments, under our $400M Cost Savings Initiative, along with the estimated charges expected to be incurred on approved initiatives under the plan:



	Employee- Related Costs		Inventory/Asset Write-offs		Foreign Currency Translation Adjustment Write-offs		Contract Terminations/Other		Total
Charges incurred to date	$	168.0	$	.7	.2		$	18.6	$	187.5
Estimated charges to be incurred on approved initiatives	.4		2.7		—		.5		3.6
Total expected charges on approved initiatives	$	168.4	$	3.4	$	.2	$	19.1	$	191.1

The charges, net of adjustments, of initiatives under the $400M Cost Savings Initiative by reportable business segment were as follows:



	Latin America			Europe, Middle East & Africa		North America		Asia Pacific			Corporate			Total
2012	$	12.9		$	1.1	$	18.0	$	12.9		$	3.6		$	48.5
2013	11.1			15.6		5.3		1.3			17.7			51.0
2014	24.5			19.9		14.0		6.5			17.1			82.0
First Quarter 2015	(.4		)	.1		1.6		.6			(.3		)	1.6
Second Quarter 2015	—			.2		4.9		(.1		)	(.6		)	4.4
Charges incurred to date	48.1			36.9		43.8		21.2			37.5			187.5
Estimated charges to be incurred on approved initiatives	.2			—		2.9		.5			—			3.6
Total expected charges on approved initiatives	$	48.3		$	36.9	$	46.7	$	21.7		$	37.5		$	191.1

As noted previously, we expect our total costs to implement restructuring to be approximately $250 before taxes under the $400M Cost Savings Initiative. The amounts shown in the tables above as charges recorded to-date relate to initiatives that have been approved and recorded in the financial statements as the costs are probable and estimable. The amounts shown in the tables above as total expected charges on approved initiatives represent charges recorded to-date plus charges yet to be recorded for approved initiatives as the relevant accounting criteria for recording an expense have not yet been met. In addition to the charges included in the tables above, we have incurred and will incur other costs to implement restructuring initiatives such as other professional services and accelerated depreciation.

Other Restructuring Initiatives

During the three and six months ended June 30, 2015, we recorded a net charge of $.1 and a net benefit of $.1, respectively, in selling, general and administrative expenses, in the Consolidated Statements of Income, associated with the restructuring programs launched in 2005 and 2009 and the restructuring initiative launched in 2012 (the "Other Restructuring Initiatives"), each of which are substantially complete. During the three and six months ended June 30, 2014, we recorded total costs to implement of $.2 and $.8, respectively, in selling, general and administrative expenses, in the Consolidated Statements of Income, associated with the Other Restructuring Initiatives. The liability balance associated with the Other Restructuring Initiatives, which primarily consists of contract termination costs, as of June 30, 2015 is not material.